NNPC may be liable for 55% of $110m Oil Spillage Ruling against Shell in Ogoni

Nigeria’s federal government, through the Nigerian National Petroleum Corporation (NNPC), may be liable for roughly N25.24 billion (about $60m), that is 55 per cent of the total N45.9 billion (about $110m) court-ordered compensation against Shell Petroleum Development Company (SPDC), for oil spillages in Ejama Ebubu community in Ogoni, Rivers State.

Though, Shell is the operator of the affected oil field, some analysts said Friday the Joint Venture (JV) arrangement implied that all the partners would be responsible for the judgment award to the Ogoni community, “since they must all absorb all liabilities.”

“The judgment is against one of SPDC’s joint ventures and the partners would have to contribute in the proportion of their interests,” remarked one analyst.

However, another analyst said it might not be that straight forward, arguing that all the joint venture partners would only be liable, depending on the JV agreement and the operator agreement signed.

Shell only runs the operations of joint ventures (JVs) in Nigeria where the federal government is the holder of 55 per cent of the assets.

If it turns out that all the JV partners are liable for the Ogoni compensation, based on the JV/operator agreement, Shell is expected to pay its share of 30 per cent of the recompense, estimated to be N13.77 billion; Total E&P Nigeria Limited will pay its 10 per cent, about N4.59 billion; while Eni which holds five per cent will pay the least amount of N2.29 billion.

The affected oil field has the government-owned Nigerian National Petroleum Corporation – NNPC owning (55 per cent share), SPDC (30 per cent), Total E&P Nigeria Ltd (10 per cent) and the Eni subsidiary Agip Oil Company Limited (five per cent), according to details on Shell’s website.

Last Wednesday, Shell finally agreed to pay an agreed compensation after a long legal battle, which commenced in 1991 over the spill that occurred 31 years ago, but was silent on the liabilities of the JV partners.

Judgment first came in favour of the Ogoni community in 2010, courtesy of Justice Ibrahim Buba of the Lagos division of the Federal High Court.

The oil giant had initially declined payment and proceeded up to the Supreme Court twice; first in 2017 to appeal the judgment of the Court of Appeal, which had upheld the judgment of the trial court and in 2019, to seek a review of the apex court judgment dismissing its appeal.

Aham Ejelamo, a lawyer to Shell, the local arm of the Royal Dutch Company, said the company resolved to pay the monetary compensation awarded in 2010 after several attempts to amend earlier judgement failed.

He informed the court of the decision to pay up the money and sought permission of the trial judge, Justice Ahmed Mohammed, to make payment through the Chief Registrar of the court in a bank account to be opened for the purpose.

However, Mohammed ruled that the money should be paid through the counsel to the Ogoni community, Chief Lucius Nwosu (SAN).

The development will put further strain on the finances of NNPC, which is currently struggling to meet its obligations to its stakeholders, including the federal and state governments, having been consistently unable to remit up to 30 per cent of its statutory contribution to the federation account for several months.

Those to benefit from the judgment include the people of Ejama Ebubu, a community in Tai Eleme local government area of Rivers State, one of the six kingdoms in Ogoni land, while other kingdoms are Babbe, Eleme, Gokana, Ken-Khana, and Nyo-Khan.

The Shell’s nod ended the legal tussle that entangled the oil giant and the community for decades.

The case was instituted in 2001 by 10 representatives of the Ejama Ebubu community against the oil company for the losses caused by the oil spills.

A source at Shell said: “The spills occurred during civil war… it was caused by the soldiers. And immediately after the war, we mobilised, cleaned, and remediated the site. We got a certificate from National Oil Spill Detection & Response Agency (NOSDRA) to that effect. The case is one-sided and judgement without justice.”

Shell had argued in court: “This spill was caused by third parties during the Nigerian Civil War, a challenging period, which resulted in significant damage to oil and gas infrastructure in the region. While SPDC does not accept responsibility for these spills, the affected sites in the Ebubu community were fully remediated.

“The claimants have, at their own admission in court, materially miscalculated and overstated the value of the award previously sought in this case. The ruling of the Supreme Court did not decide liability or the size of the award, which remains in dispute in other ongoing court proceedings.

“It is our position that any attempt to enforce payment should not be permitted. It is regrettable that the legal process in this case had focused for so long on procedural issues and not the merits of the case. We have always maintained that we are ready to defend this case based on the available facts.”

There’s currently an ongoing negotiation between the federal government and the oil giant as to its future operation in the country, with the company’s Chief Executive Officer, Ben van Beurden, insisting in May that the company could no longer bear its exposure to the risk of theft and sabotage in the Niger Delta.

With 19 Oil Mining Leases (OMLs) in its SPDC subsidiary, a THISDAY report quoted Wood Mackenzie , a global research firm, yesterday as valuing Shell’s JV assets in Nigeria, excluding export pipelines and terminals, at $2.3 billion.

Shell is planning to sell off all its assets in the shallow waters and onshore, leaving only its offshore operations intact in Nigeria.

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